Piper Sandler analyst Alexander Potter has raised the price target for Tesla (TSLA, Financial) from $315 to $500, representing a 20.45% increase from its recent closing price of $415.11. This adjustment comes amidst potential challenges such as new electric vehicle policies under Trump, delivery uncertainties, and adverse automotive gross margins. Despite these hurdles, Potter maintains an "overweight" rating on Tesla, highlighting it as a top "buy and hold" choice.
The report from Piper Sandler identifies two critical factors for Tesla's near-term success: sales volume and per-vehicle profit. Tesla plans to release new models soon, but the timeline remains uncertain, making it difficult to predict sales figures for 2025. Although sales might fall short of expectations, clear evidence is unlikely before the upcoming earnings call on January 29.
Piper Sandler is optimistic about Tesla's profit margins, expecting strong profitability as long as new products are launched as planned. The report also emphasizes the importance of emerging technologies like the Optimus robot and AI services for Tesla's future success. Due to the challenges in valuing these uncertain revenue streams, Piper Sandler uses a price-to-earnings ratio method rather than a discounted cash flow approach. The $500 target price is based on a 120x P/E ratio of Tesla's projected 2026 earnings.
Potter anticipates that in the coming year, investors will gain a clearer understanding of Tesla's new product offerings.
